Here Comes the Stimulus!

I'm with Martin. That put our brainstorming over in the What's in a Name thread to shame. Brilliant.

Thanks for posting that. It'll be in the email boxes of everyone I know in about five minutes.

The grim reality is that once the government begins to explicitly run the entire health care sector, Bullshitisol will be the only drug available.

That's my old college buddy Ted Balaker narrating. I am so proud. To think that the College Republicans at the state and national levels used to refer to us as the "pig f'ers at UCI" for our libertarian leanings.

Ted also has a great interview with his old boss John Stossel:

http://www.reason.com/blog/show/131475.html

So let me get this right. If we do nothing and we are currently loosing 500,000 or 600,000 jobs a month how do things get turned around before we see 15 or 20% unemployment?

You have the chutzpah to say that we are doing nothing right now! When was the first stimulust bill passed by the Democrats? How many trillions have been buried in the money hole already?

Without swift passage of his stimulus bill, Obama said, "an economy that is already in crisis will be faced with catastrophe."

Senate Democratic Whip Dick Durbin of Illinois warned against cuts: "Every time we lop off $100 billion, we're lopping off jobs," he said.

Dick Durbin has been embarrassing my state for years.

Meanwhile, Obama has tried to push passage: "The time for talk is over. The time for action is now."

This is the best and the brightest?

And when it doesn't work? What happens then?

So let me get this right. If we do nothing and we are currently loosing 500,000 or 600,000 jobs a month how do things get turned around before we see 15 or 20% unemployment?

A small central committee not commanding the expenditure of a trillion bucks by an established authoritarian, hierarchical bureaucracy doling out dollars to an established, quasi-private, corporatist bureaucracy is not equivalent to "doing nothing". Millions of individuals across the vast extent of the United States do things every day, and we could "stimulate" by simply entitling them to do more of these things.

I've discussed an "opportunity lottery" for example. If you think you can organize some idle resources profitably, you post a brief business plan at a web site and pay $100 for a lottery ticket. You may buy as many tickets as you please. Other players browse ten thousand of these business plans and cast a vote for one they like. The plan with the most votes wins. Since no individual player reads all of the plans, the winner is chosen largely but not entirely at random.

You don't simply win the million bucks amassed from all of the hundred dollar entry fees. You win a corporation with a million dollar line of credit. You own most or all the shares of this corporation, but the corporate charter restricts your expenditure of the credit on your personal consumption. You may pay yourself a limited salary to organize the business, but that's all. You may purchase resources including labor, but other wages are also limited, so you may not simply hire your husband or wife for a million bucks a year and declare bankruptcy after a year; however, you may bargain with your shares in the corporation to obtain labor and other resources. Other assets you purchase from the line of credit are property of the corporation.

After a period of time, if your business is profitable, you may continue operating it or you may sell your shares in it. As you repay the credit, with interest, individuals who bought lottery tickets receive a refund with interest. If the corporation is not profitable after a period, it declares bankruptcy, its assets are sold, and any value is distributed first to ticket holders, until ticket costs are refunded, and then to shareholders.

Basically, it's a bank without the deposit insurance or any pretense that making a deposit offers any assurance of a return. You pay only to play. Any return is a bonus.

I say take that trillion and spend it on extended unemployment benefits for a year. Give people time to adapt and avoid shock.

I don't see how extended unemployment benefits help. These benefits provide bare subsistence at best. The benefits don't provide enough capital to organize idle resources into a new profitable configuration or at least to try, and existing organizations may not have available capital to organize them either.

There is certainly enough capital in the U.S. to feed everyone, but there needn't be enough available capital to feed workers at least trying to organize profitably, because an arbitrary share of the yield of this capital can simply feed persons entitled to consume, like the recipients of unemployment benefits or Social Security benefits or interest on Treasury notes or dividends from Lockheed Martin or a pension from GM or soldiers blowing holes in the Earth and refilling them or employees of NASA or bankers with endless streams of bailout money.

Know what made me laugh harder than the "commercial" and the Yes Minister quote?

Muirdiot trying to do math! HILARIOUS!!

Russ and Don could make money on this blog by letting us pay to hurl appropriate insults at muirg. OK, I won't say any more, but the temptation is great.

Martin,

"I don't see how extended unemployment benefits help. These benefits provide bare subsistence at best."

Its enough to allow people time to move in with family, find roommates, and with some effort new jobs.

"The benefits don't provide enough capital to organize idle resources into a new profitable configuration…"

They don't need to. The markets will decide how to reorganize most efficiently. And there's no incentive to creativity like being unemployed and living back home with mom, or having a roommate that keeps playing the same damn CD over and over again.

I'm still waiting for George's take on former Clinton economic advisor Alice Rivlin's criticism of this package. She says that stimulus is a good idea and a spending spree is a good idea, but the stimulus needs to be done now, with the spending spree thought out over time. She calls this bill all spending spree, minimal stimulus, making it precisely the wrong thing to do now. I guess that makes her a supply sider.

Martin,

Well said. I have had very similar sentiments about the trickles coming from washington.

George, you are a sloppy reader and an even sloppier thinker.

Sam is right. That's worse than sloppy thinking.

Posted by: MnM

Bull crap. The government doesn't have to wait for the the taxes from private investment to create jobs by it's spending.

Sure eventually they have to be paid back but how better to do so then by getting the economy rolling again rather then following your Coolidge/Hooverite mantras that will spiral us down to greater and greater unemployment numbers.

The flip side is where is trhe growth going to come from if not the government. No one is lending, no one is buying, no one is investing… WHERE??

Claiming so IS lazy thinking.

where is trhe growth going to come from if not the government.

Growth that comes from government is called economic cancer.

Notice that he does nothing to address my criticism.

Yes, exactly. And if Herbert had acted in accordance with his own words it would have been.

Randy,

Herbert didn't do anything until his last year 1932 and things got worse and worse and infact just started improving or bottoming out after 1932.

Muirgeo,

He signed Hawley Smoot in 1930.

Hell, Randy, Hoover was in favor regulation when he was Commerce Secretary. He didn't wait until 1930 to be a Big Government guy.

IAC, it should be noted that the precursor to the internet was created by a relatively few individuals, not by "the government". It was the creativity of the individuals and their desire to effect a function that created the internet's beginning, and it was private actors seeking profit that made the internet invaluable.

Its enough to allow people time to move in with family, find roommates, and with some effort new jobs.

New jobs are the difficulty we're discussing. Here, you simply assume their existence.

They don't need to. The markets will decide how to reorganize most efficiently.

If whatever established authorities decree is "most efficient" by definition, this statement is simply tautological, but established proprietors may decide that established proprietors are entitled to so much consumption from existing capital, other than the idle labor, that no demand for idle labor exists. Even if established proprietors promise themselves less, endogenous demand in monetary terms may not be adequate to integrate labor with other capital at its greatest value or even to employ much idle labor at all. In a modern economy, labor isolated from other capital in this way has far less value regardless of its qualities.

For example, I'm a software developer with many years of experience; however, my most valuable experience involves highly specialized tools, far more specialized than a particular operating system and programming languages. To be most productive and most valuable, I must employ costly tools, like a database server running specialized software and specialized client software and specially configured network hardware and software and related development tools for all of these components.

If I don't own these tools myself, I must obtain credit, from an existing proprietor of the tools or from some other source, to integrate my labor with the tools; otherwise, my labor is much less valuable, less valuable to me and less valuable to everyone else as well.

In most cases, I don't own the tools myself. A corporate employer owns them and effectively lends them to me in exchange for their marginal value in synergy with my labor. An employer may extend this credit by reinvesting its own profits, or if its profits are insufficient to employ me, it may seek other credit.

Here's one key to understanding "inadequate demand" when exogenous credit is scarce. When my labor is integrated with these costly tools, both my labor and the tools are more valuable. Expecting an owner of the tools to extend me credit from profit generated by the tools is unreasonable, because this profit does not exist until the owner employs me. Realizing the value of this synergy requires an exogenous source of credit. This credit is an entitlement to consume other goods before the value of this synergy exists, long enough for the synergy to emerge.

And there's no incentive to creativity like being unemployed and living back home with mom, or having a roommate that keeps playing the same damn CD over and over again.

If I or someone else may not purchase very costly tools on credit, even if I or someone else may not purchase my own labor on credit and integrate it with very costly tools, all the incentive imaginable won't employ me at my greatest value.

True, and I believe that the productive class is far more capable of creating jobs, and far less prone to wasting resources, than the political class.

That's beside any point I make in the post. Some monetary authority (author of money) must extend credit for this purpose. If you'd rather not call these authorities "the political class", that's fine with me, but regardless of this label, someone must exercise this authority. Money for this purpose doesn't just fall from the heavens like manna, and it's not just out there already, not necessarily anyway.